Philip Fisher examines the latest dismal verdict on auditor competency and asks: what will make auditors toe the line?
Before people get too excited, this article is not intended as a witch hunt against what is now the UK’s sixth-largest firm of accountants.
Sadly, following the latest FRC annual report on the competency of auditors of FTSE 350 companies, there is a serious question about whether any of the firms in our profession is able to do this basic job to an acceptable level.
Grant Thornton makes the headlines because the practice’s statistics are even worse than those of its competitors. To compound the problem, the powers-that-be at the firm do not seem to learn from their mistakes.
Their cause is hardly helped by the high-profile failure of Patisserie Valerie, following audits that failed to identify endemic signs of impending disaster. There is also a question over the current Sports Direct audit, with an announcement delayed at the last minute.
The FRC reviews very small numbers of audits and requires the country’s top accountants to achieve at least a 90% success rate, graciously accepting audits that require limited improvements. Remarkably, none of those reviewed ever seems to achieve this target.
As has been suggested in this column before, the public should have a reasonable expectation that auditors will get it right 100% of the time, give or take the odd lapse that could give rise to a limited improvement.
When Grant Thornton is scoring at 50% (including 25% where significant improvement was required) and PwC 65%, something has gone seriously wrong. One might almost applaud KPMG for its massive improvement iss>
g au-largest firm of accountants.